Handling Joint Accounts in Your New Jersey Divorce
Once a couple starts a divorce, they have to sort out what to do with their shared property, including joint financial and other accounts. Your checking and savings accounts, investments, credit cards, safe deposit boxes, and other property will all have to be distributed as part of the divorce process.
If the divorcing spouses are civil with each other, then the distribution of joint accounts can be accomplished quickly and fairly. In many cases, the spouses exchange their Case Information Statements and their account statements, then work out a deal to apportion the joint marital accounts. Of course, not all divorces are civil; some turn into a war. In these cases, it is not uncommon for a spouse to withdraw all of the funds from a joint account, and then hide the money. In some cases, uncovering these hidden assets is more complicated than litigating the divorce case.
This article explains how New Jersey law treats these joint accounts when a couple divorces. For more information on New Jersey family law, see the New Jersey Divorce and Family Law page. You can find all of our articles on how property division at the end of a marriage in the Divorce and Property area.
Joint Bank Accounts
All of your joint bank savings and checking accounts will have to be liquidated and distributed when you divorce. I always advise my clients at the time of separation to open their own checking and savings accounts. This allows you to establish a separate financial identity again. It also gives you a place to put your money that isn't accessible to anyone but you.
To make sure neither spouse makes off with the couple's money, spouses can freeze all of the joint accounts and make sure that the bank doesn't allow any transactions (withdrawals, automatic payments, and so on) without authorization from both spouses. This is a good idea in any acrimonious divorce. If one spouse resides in or hails from another country, this strategy will ensure that the couple's money isn't transferred to a foreign land: As a practical matter, once money is transferred to another country, it's very difficult (and costly) to get it back.
Another option is to close all of the joint accounts and deposit the couple's money into one frozen account. A couple may also opt for an "escrow" account, which an officer of the bank is assigned to monitor. The officer must give written authorization before any transaction may be conducted involving the account.
A spouse can also simply withdraw half the money in each account and deposit it into a new individual account, leaving the joint account to become the other spouse's individual account.
Most divorcing spouses will want to use one of these strategies to prevent one spouse from unfairly emptying joint accounts. Although a court will almost certainly order the guilty spouse to reimburse the other, actually getting that money back will take a lot of time and effort -- and money. It's far better to prevent the problem in the first place either by separating the accounts or placing all of the money off limits to either spouse acting alone.
Joint Credit Card Accounts
You should close out all joint credit cards once the divorce case is filed. Even after you've filed for divorce, both spouses are still jointly responsible for debt charged up on a joint credit card. (If the credit cards are held under separate names, then there is no liability for the spouse whose name is not listed on the credit card.) Like joint bank accounts, joint credit card give a malicious spouse the opportunity to harm the other financially. In some cases, a spurned spouse will even try to ruin an ex’s credit by ruining up the balances on any joint credit cards.
To close joint credit card accounts, you must formally write to the creditor and notify it of the impending divorce. You should request that the credit card account be closed and that the credit cards be canceled. You should also ask the credit card company to provide a current statement of the account and put the company on notice that you do not intend to be held liable for any debt charged after the date of the letter. It is wise to send these letters by certified mail, so you'll have proof of the date they were received by creditors. In some instances, the creditor will ask that the outstanding balance on the account be paid in full before it can be closed. If it is possible to comply with this, then do so. If not, ask the company to at least place the account on inactive status so that no new additional charges may be added; you should also make clear that once the balance is paid in full, the account is to be closed fully. Most of the time, these requests will be granted immediately.
Equity Lines of Credit on the Marital Home
One type of joint credit that some people tend to overlook is an equity credit line against your home. This is an open-ended loan that is granted by a financial institution (usually a bank), for which your home serves as the security. The lender places a lien against your home, which is recorded against the title. If you default on your payments, the lender can force a sale of your home. If there is an equity credit line on your home, then you should immediately contact the bank and request that it be frozen. If you leave it open, you are exposing yourself to the possibility of losing your home.
I had one case in which the wife took out almost $120,000 in cash from an equity line of credit. The unsuspecting husband never knew that his wife was draining all of the equity out of the marital home. As sometimes happens when relationships deteriorate to this point, the wife forced her husband's signature on applications to obtain cash advances on their equity line of credit. Even though this type of fraud is illegal, it's rarely prosecuted. And, once a spouse takes the money, it can be difficult to recoup.
Security Margin Accounts
Similar to an equity line of credit, a security margin account allows a couple to withdraw money, using their stock portfolio as security. You should follow the same procedures described above for credit cards and equity lines of credit, to make sure that your spouse cannot withdraw money, trade stocks, or draw profits without your knowledge.
Safe Deposit Boxes
Some couples keep cash and other valuable items in their safe deposit boxes. Once a divorce starts, one spouse can empty out the box and take the money.
Safe deposit boxes are easy for either spouse to access. Unfortunately, the spouse who gets there first has the opportunity to take the money and run. Banks do not check with the courts to see whether a couple is in the process of a divorce; if someone is authorized to access a box, the bank will allow it. If a safe deposit box is cleaned out, then there is very little chance that the contents will ever be recovered.
If a divorce is pending, you should go to the bank where the safe deposit box is located and request that it be frozen. It's a good idea to follow up this request in writing via a certified letter.
At the very least, you should try to make an inventory of the safety deposit box and take photographs of the contents. Then, have an officer of the bank sign your inventory. If anything is later removed, this will give you proof of what was taken.
To protect joint investments and other holdings, you should make a complete list of all such assets. You should also contact your broker or other financial officer immediately, to give notice of the impending divorce. Request that no stocks or other holdings be moved or transferred without the knowledge and written approval of both spouses. Immediately send a statement to this effect in writing. Be sure to ask the broker or officer to make a note to the electronic record of your account as an added safeguard. Given the sophisticated nature of today's markets, many transactions are conducted over the phone or online in a matter of moments, so time is of the essence.
Joint Phone Accounts
Once you file for divorce, you should also contact your cell phone service provider and shut down (or just remove your name from) joint accounts. Otherwise, you could be on the hook to pay a spouse's phone bill.
Joint Utility Accounts
If you move out of your marital home, you should have your name taken off of all utility accounts. Although it's rare, an extremely angry ex might try to run up utility bills out of spite. Much more common, you will simply remain on the hook for the regular cost of utilities that you are no longer using. These bills might not be high (although heat in the winter can get costly), but your credit will be affected if your spouse doesn't pay them.